Completing the Taxonomy's Missing Pieces
When the EU Taxonomy was adopted in 2020 as the foundational reference framework for sustainable finance, it defined six environmental objectives. However, technical screening criteria were initially published for only two: climate change mitigation and climate change adaptation. With Commission Delegated Regulation 2023/2486, technical screening criteria for the remaining four environmental objectives were adopted and entered full application in 2025 (Regulation 2020/852, Article 9).
This expansion significantly broadens the Taxonomy's scope and brings new economic activities into the sustainable investment classification.
The Six Environmental Objectives
The EU Taxonomy requires that an economic activity make a substantial contribution to at least one of six objectives while not causing significant harm (DNSH — Do No Significant Harm) to any of the others:
- Climate change mitigation — preventing or reducing greenhouse gas emissions
- Climate change adaptation — increasing capacity to adapt to the adverse impacts of climate change
- Sustainable use and protection of water and marine resources
- Transition to a circular economy
- Pollution prevention and control
- Protection and restoration of biodiversity and ecosystems
Technical screening criteria for the first two objectives have been in force since 2021. The new delegated regulation defines over 30 new economic activities for the remaining four objectives (Commission Delegated Regulation 2023/2486).
New Objectives and Scope
Water and Marine Resources
Activities under this objective include:
- Water treatment and recycling technologies
- Sustainable water management infrastructure
- Marine ecosystem protection activities
- Freshwater ecosystem restoration
Technical screening criteria are designed in alignment with the EU Water Framework Directive and the Marine Strategy Framework Directive.
Circular Economy
The circular economy objective covers activities based on the waste hierarchy principle:
- Plastic packaging recycling and reuse
- Textile recycling facilities
- Construction and demolition waste recovery
- Repair and refurbishment services extending product lifespan
This objective holds particular potential for creating new Taxonomy-aligned revenue streams for companies in the manufacturing sector.
Pollution Prevention and Control
- Industrial emission reduction technologies
- Soil remediation activities
- Air quality monitoring and improvement
- Chemical risk management
Criteria were developed with reference to the EU Industrial Emissions Directive and REACH Regulation.
Biodiversity and Ecosystems
- Forest restoration and sustainable forest management
- Nature-based solutions
- Habitat conservation and restoration
- Sustainable agricultural practices
This objective aligns with the EU Biodiversity Strategy 2030 targets (European Commission, 2020).
What Changes for Financial Institutions?
The Taxonomy expansion has a direct impact on financial institutions:
Taxonomy Alignment Reporting
Financial institutions subject to CSRD must report the proportion of Taxonomy-aligned activities in their portfolios. With criteria now in force for all six objectives:
- The scope of the Green Asset Ratio calculation expands
- Newly aligned activities may increase portfolio green ratios
- Detailed activity-level analysis per client is required
Link to the Green Bond Standard
The European Green Bond Standard (EU GBS) uses Taxonomy alignment as the reference framework for bond issuance. The new objectives expand the categories of projects eligible for green bond financing.
Practical Considerations
Several challenges are expected in applying the new technical screening criteria:
- Data availability: Standardized data sources for water use, biodiversity impact, and circularity metrics are not yet mature
- DNSH assessment: Cross-cutting DNSH assessment across all six objectives becomes more complex
- Sectoral guidance: Additional sectoral guidance from the Platform on Sustainable Finance is expected
- Transitional activities: The classification of certain activities as transitional affects long-term investment decisions
Implications for Turkish Companies
The Taxonomy expansion holds strategic importance for Turkish companies with EU market access or those raising capital from European investors:
- Taxonomy alignment is becoming increasingly decisive for green financing access
- EU-based clients will begin requesting Taxonomy alignment data from suppliers
- Circular economy and pollution prevention investments can now be assessed under the Taxonomy framework
Bottom Line: The entry into force of technical screening criteria for all six EU Taxonomy environmental objectives completes the sustainable finance framework. Companies and financial institutions should integrate the expanded scope into their strategic planning.
See how enterprise teams assess EU Taxonomy alignment across their activities.